STATE AUDITOR JOHN MORRISON CAUTIONS MONTANANS TO BE ON THE LOOKOUT FOR "MILLIONAIRE WHEEL" - A SUSPECTED ILLEGAL PYRAMID SCHEME
State Auditor John Morrison is warning all Montanans, and specifically Yellowstone county residents, about a possible pyramid scheme circulating in the area.
The scam, known as "The Millionaire Wheel" asks for a small cash investment to become a member, and promises investors a monthly income as later recruits join the circle. The ploy requires investors to enlist at least four other people and promises that once they reach a certain level on the "wheel", they will be earning over $1,000,000.
"The Millionaire Wheel appears to be a classic example of a pyramid scheme," said Morrison. "Virtually all pyramid schemes are fraudulent. You don't become a millionaire in these scams. The pyramid will collapse and you will lose your money."
A pyramid scheme depends on the recruitment of an ever-increasing number of new participants. Money from later investors is "recycled" to earlier investors but eventually the pool of people available for recruitment dries up and the pyramid collapses. A vast majority of people will lose all their money. Pyramid schemes are illegal. A person found to be promoting or participating in a pyramid scheme could face penalties of up to $100,000 per violation and 10 years in prison.
Besides being a suspected pyramid scheme, The Millionaire Wheel is not organized or licensed as a security as required by state and federal law.
"It's important for Montana investors to check out any investment, even if you know the person promoting it" Morrison said. "A friend may not mean to get you involved in a pyramid scheme; they may not even know it's fraud. That's why it is critical to know how to recognize scams and protect yourself."
Morrison offers the following steps to help people avoid falling prey to scams:
- Be cautious of any plan that requires recruitment of new members, or promises commissions for the recruitment of new members. Call the State Auditor's Office to check on the legitimacy of this type of operation.
- Remember that there is no such thing as a low-risk, high-return investment.
- Never rush into an investment. Make sure you've reviewed all the documents relating to an offer and fully understand the investment before turning your money over.
- Don't pay money or sign contracts in high-pressure situations.
- Avoid any investment that requires or asks for secrecy.
"Our best rule of thumb is 'if it sounds too good to be true, it probably is'," said Morrison.
- Investigate before you invest.
If you are contacted or have any information about "The Millionaire Wheel" or any other pyramid scheme, please call the State Auditor's Office at 1-800-332-6148.